The Reserve Bank of Australia (RBA) is expected to leave the official cash rate on hold when the board meets later today.
Shane Oliver, head of investment strategy and chief economist at AMP Capital, said the cash rate is likely to remain steady at 2.5 per cent for some months to come.
“The Reserve Bank of Australia is expected to leave interest rates on hold for the sixth meeting in a row. The RBA has clearly indicated that with growth remaining low but with tentative signs of improvement in some indicators, a period of stability in interest rates is appropriate. Since not enough has really changed since the last meeting, this remains the case,” he said.
“Soft jobs news and the poor business investment outlook do suggest though that our expectation for rate hikes to commence later this year may be premature, with the risk being they won’t occur till next year.”
A finder.com.au survey reached the same conclusion, with 10 of Australia’s leading economists unanimously predicting no rate change tomorrow.
Michelle Hutchison, money expert at finder.com.au, said the recent stability in the cash rate and the low interest rate environment had caused borrowers to gravitate towards variable rate home loans.
“With every economist in our survey expecting the Reserve Bank to leave the cash rate at 2.5 per cent, and home loan interest rates at record lows, it’s no wonder we’re seeing borrowers sticking with variable rates,” she said.
“The biggest concern is that fixed rates are starting to rise and borrowers may miss out on securing a low rate if they want to fix their home loan later.”
According to finder.com.au, the average three-year fixed rate has increased by 0.16 percentage points to 5.11 per cent since September 2013 – but this remains lower than the variable rate average, which currently sits at 5.39 per cent.